Fannie Mae released more details of its new mortgage servicer evaluation program Wednesday afternoon, ultimately laying out plans to align the grades with compensation.
The government-sponsored enterprise announced Wednesday at the Mortgage Bankers Association Servicing conference its new two-part Servicer Total Achievement and Rewards (STAR) program. The system is designed to both improve servicing practices for Fannie Mae borrowers and reward servicers that do their job well.
STAR includes an evaluation of a servicer's internal business practices, such as borrower outreach and timeline management, and measures their effectiveness on a scorecard.
Fannie Mae's scorecard gauges a servicer's effectiveness based on criteria in four areas: roll rates, solution delivery (how many homeowners were helped), workout effectiveness (how many workouts are sustainable) and timeline management.
Based on a rating out of five stars, with five being an outstanding performance, Fannie Mae will reward its servicers. Senior Vice President of the firm Jeff Hayward said Fannie Mae plans to align servicer compensation with the rating system. Leslie Peeler, vice president of Servicing Portfolio Management, said other financial incentives may be implemented as part of this program.
Fannie Mae will address concerns over any servicer that receives less than three stars through its established portfolio management practices. But it's nothing outside of normal protocol, Fannie executives said.
Fannie Mae servicers will receive scorecards on a quarterly basis and Peeler anticipates the first to be delivered during first quarter of 2012.
The panel also mentioned that new reporting requirements will be put in effect with this program, but none have been set yet.
Write toChristine Ricciardi.
Follow her on Twitter @HWnewbieCR.

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